Cypriot deal no blueprint, says Stevens
But Monday's agreement, struck hours before a deadline that would have triggered a collapse in Cyprus' banking system, was much better than the initial proposal, Mr Stevens told a forum.
The deal involved a radical plan to secure a €10 billion ($12.3 billion) bailout from European authorities without imposing losses on Cypriots with deposits worth less than €100,000.
Initial market euphoria from Europe's 11th-hour deal quickly gave way to fear after the head of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem suggested the deal could form the basis for future bailouts in the economically troubled zone.
Australia followed global markets lower with the benchmark S&P/ASX 200 Index on Monday ending down 0.8 per cent at 4950.2 points.
Adding to concerns, Cyprus reversed course and decided to keep its banks shut until Thursday. This cancelled an earlier decision to open most banks on Tuesday. The banking sector of the island nation has been in a 10-day lockdown for fear of a run on deposits.
After European markets closed, Mr Dijsselbloem's office sought to clarify the comments saying Cyprus "is a specific case with exceptional challenges".
Mr Stevens told an ASIC forum on Tuesday that global markets were in a "better place" now than a few days ago.
"The reconstructed deal, as I understand it ... is a better one than the initial proposal," he said.
"We've had a number of programs now. We've had Ireland, Greece, Portugal, Spain, Cyprus, and they're all actually a bit different. So I'm not sure if any one of them is clearly a template. And I suspect that the Europeans will be somewhat case-specific."
Separately, Mr Stevens said changes to global bank regulations have been more difficult than anticipated, with only Australia and 10 other jurisdictions so far adopting key parts of the reforms. Europe and the US are yet to make all the changes.
Rather than implementing global financial regulations, the emphasis should be on the implementation and monitoring of how the changes are helping or hurting.
"Reforms that seemed so simple and obvious, so bold and so sweeping in the immediate aftermath of the crisis of 2008, have turned out to be harder to implement than first expected," he said. "The financial reform agenda post 2008 has been very large and comprehensive. There has been a prodigious amount of work across a wide front."
Frequently Asked Questions about this Article…
The deal secured about a €10 billion bailout from European authorities and, in its reconstructed form, avoided imposing losses on Cypriots with deposits under €100,000, according to coverage of the agreement.
No. Glenn Stevens cast doubt that the Cyprus deal would be a clear "blueprint," noting past programs for Ireland, Greece, Portugal, Spain and Cyprus have all been different and that European responses are likely to be case‑specific.
Markets swung from initial euphoria to renewed fear after comments about the deal’s wider implications. In Australia the S&P/ASX 200 Index fell 0.8% to 4,950.2 points on the day the deal was announced.
Jeroen Dijsselbloem suggested the deal could form the basis for future bailouts, which increased market concern; his office later clarified that Cyprus is a specific case with exceptional challenges.
Cyprus had its banking sector in a 10‑day lockdown amid fears of a run on deposits. After the bailout agreement the government reversed an earlier decision to reopen on Tuesday and kept banks shut until Thursday.
Stevens said implementing global bank regulation changes has been harder than expected. So far only Australia and about 10 other jurisdictions have adopted key parts of the reforms, while Europe and the US have yet to make all the changes.
Stevens emphasized that rather than just setting global rules, the focus should be on implementing and monitoring how reforms are helping or hurting. He noted the post‑2008 reform agenda has been large and comprehensive but difficult to fully implement.
The article indicates that European bailouts have been case‑specific rather than one-size-fits-all. Investors should be aware that each crisis can be handled differently and that policy responses may vary by country and circumstances.
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